With regard to the tax treatment of self-employed persons (personal income tax) and companies (corporate income tax), the following tax advantages of companies can be identified in simplified terms. It should be noted from the outset that the incorporation of a company should always be based on genuine business and organisational requirements and not solely on the aim of obtaining a tax advantage.
When choosing between registering as self-employed or setting up a company (S.L.), costs and timeframes are often important factors in addition to the legal and tax considerations. This article provides an overview of the costs involved and the time required for the respective procedures.
Although entrepreneurs are generally free to carry out their activity either as sole traders or through a company, there are tax-related limits governing the relationship between a company and its shareholders which, if disregarded, may result in the improper use of the tax advantages associated with a corporate structure.
The main legal aspects can be summarised in terms of assets and liability, as business owners may be subject to different degrees of liability depending on the chosen business structure and may, in certain circumstances, be personally liable with their private assets.
Another aspect to consider when choosing the appropriate business structure is the main residence of the shareholders and, more specifically, of the company's management or, in the case of a sole trader, the business owner. In particular, businesses that provide services or trade in products (outside the traditional manufacturing sector) can often operate or provide services from different countries.
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